30% of the working-age population was unemployed

Transcription

Sickness, Disability and Work:
Breaking the Barriers
Too many workers leave the labour market permanently owing to health problems, and yet too many
people with reduced work capacity are denied the opportunity to work. This is a social and economic
tragedy common to virtually all OECD countries, and an apparent paradox that needs explaining.
Why is it that the average health status is improving, yet a persistently large number of people of
working age leave the workforce to rely on long-term sickness and disability benefits?
This third report in the OECD series Sickness, Disability and Work explores the possible factors
behind this paradox. It looks specifically at the cases of Denmark, Finland, Ireland and the
Netherlands, and highlights the roles of institutions and policies. A range of reform recommendations
is put forward to deal with specific challenges facing the four countries.
Experiences in the four countries offer some lessons on the importance of financial incentives for the
main actors: private and public institutions (including public employment services, social insurance
institutions and municipalities), employers, and workers. Good incentives will help to achieve the
necessary shift in mentality, from providing insurance to activation, to promote better co-operation
across actors, and to foster reform and system implementation in line with policy intentions. This
should improve outcomes.
In the same series:
Vol. 1: Norway, Poland and Switzerland (2006)
Vol. 2: Australia, Luxembourg, Spain and the United Kingdom (2007)
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vol. 3: denmark, finland, Ireland and the netherlands
Despite a range of good-practice elements in this regard, in all four countries more can be done
to avoid the flow onto benefits and to move benefit recipients back to employment. Many people
with health problems or reduced work capacity can work, and want to do so. Helping those people
is potentially a true “win-win” policy: it helps them avoid exclusion and have higher incomes, while
raising the prospect of higher economic output in the long term.
Sickness, Disability and Work: Breaking the Barriers
vol. 3: denmark, finland, ireland and the netherlands
Sickness, Disability
and Work:
SWEDEN: d
Sickness, Disability
and Work
BREAKING THE BARRIERS
SWEDEN: WILL THE RECENT REFORMS MAKE IT?
Organisation for Economic Co-operation and Development
Directorate for Employment, Labour and Social Affairs
FOREWORD – 3
FOREWORD
Sickness and disability is a key economic policy concern for many OECD countries. Medical
conditions, or problems labelled as such by societies and policy systems, are proving an increasing
obstacle to raising labour force participation and keeping public expenditure under control. More and
more people of working age rely on sickness and disability benefits as their main source of income,
and the employment rates of those reporting disabling conditions are low. There is now an urgent need
to address this “medicalisation” of labour market problems. In the current economic downturn, there is
a risk that countries may be tempted to revert to using sickness and disability schemes to massage
politically sensitive unemployment figures. The current context makes the reforms in Sweden
especially important, but potentially more challenging to manage politically.
The OECD’s Thematic Review on Sickness, Disability and Work examines national policies to
control the inflow into sickness and disability benefit programmes, and to assist those beneficiaries
who are able to work to reintegrate the labour market. It attempts to discover what leads a person with
a health problem to withdraw from the labour market or remain outside of it, and to identify areas for
further policy improvement. The main concern of the review is with people who could work but do not
work. Many people with health problems can work and want to work, so any policy based on the
assumption that they cannot work is fundamentally flawed. Helping people to work is potentially a
“win-win” policy: it helps people avoid exclusion and have higher incomes while raising the prospect
of more effective labour supply and higher economic output in the long term.
Sweden has not formally participated in the OECD’s Thematic Review of eleven countries
published in Volumes 1-3 of Sickness, Disability and Work: Breaking the Barriers. Instead it
requested the OECD Secretariat to review the potential of its most recent and ongoing reforms,
especially in regard to sickness absence and sickness benefit policy. This report is an assessment of the
Swedish reforms, which aim to lower inactivity and increase participation, against the background of
recent trends and policy responses in other OECD countries. It looks at what Sweden is currently
doing and what more it could do to transform its sickness and disability schemes from passive benefits
to active support systems that promote work. The report consists of three sections. Chapter 1 sets the
scene by looking at key trends in the past 15 years and main policy responses until 2006. Chapter 2
discusses sickness and disability policy reforms introduced or further elaborated by the new
government. Chapter 3 looks at what is needed in the short and long term to make the reforms work.
This report was prepared by Allen Gomes, Ana Llena-Nozal and Christopher Prinz (team leader),
statistical work was provided by Dana Blumin and Maxime Ladaique, and administrative support by
Claire Gibbons. Important inputs for the report were supplied by three Swedish government
departments, the Ministry of Health and Social Affairs, the Ministry of Employment and the Ministry
of Finance.
SICKNESS, DISABILITY AND WORK: BREAKING THE BARRIERS – THE CASE OF SWEDEN © OECD 2009
TABLE OF CONTENTS – 5
TABLE OF CONTENTS
Executive Summary ................................................................................................................... 7
Chapter 1: Setting the Scene ...................................................................................................... 9
1.1. Key trends since 1990 ...................................................................................................... 9
1.2. Major reforms in the period 1990-2006 .......................................................................... 12
A.
The 1990s ............................................................................................................. 12
B.
Since the turn of the century.................................................................................. 13
1.3. How Sweden compares with other OECD countries....................................................... 14
A.
Sickness and disability benefit .............................................................................. 15
B.
Social and economic integration of people with disability ..................................... 20
Chapter 2: Recent and Ongoing Reforms ................................................................................. 23
2.1. Benefit reforms .............................................................................................................. 24
A.
Sick-leave benefits: workers’ rights and responsibilities ....................................... 24
B.
Sick-leave benefits: employers rights and responsibilities ..................................... 25
C.
Sick-leave and disability benefits: the role of the SIA ........................................... 26
D.
Encouraging persons with disability back into the labour market .......................... 26
E.
Employment programmes for persons with disability ............................................ 27
2.2. Institutional reforms ....................................................................................................... 27
A.
Constraining medically determined sick-leave ...................................................... 28
B.
Building rehabilitation capacity using a public-private approach........................... 29
C.
Restructuring the SIA............................................................................................ 30
2.3. Comparing the reform intensity ...................................................................................... 31
Chapter 3: Making the Reforms Work ..................................................................................... 35
3.1. Ensure widespread acceptance of and support for reform ............................................... 35
A.
Involving all stakeholders ..................................................................................... 35
B.
Supporting change in industrial relations .............................................................. 36
3.2. Strengthen responsibilities and incentives of key players ............................................... 36
A.
Employer responsibilities and incentives ............................................................... 37
B.
Facilitating labour demand .................................................................................... 38
C.
Compliance with sick-leave guidelines ................................................................. 39
D.
Incentives for county authorities ........................................................................... 40
E.
Making work pay .................................................................................................. 41
3.3. Facilitate policy implementation by continuing institutional change .............................. 42
A.
Improving institutional cooperation ...................................................................... 42
B.
Modernising service provision .............................................................................. 43
3.4. Conclusion ..................................................................................................................... 44
Bibliography ............................................................................................................................ 45
List of Acronyms...................................................................................................................... 49
6 – TABLE OF CONTENTS
Figures
Figure 1.1. The four waves of incapacity benefit growth until 2004 .................................... 10
Figure 1.2. A strong positive correlation between unemployment and disability
across Swedish regions...................................................................................... 10
Figure 1.3. Sickness trend no longer follows the employment trend in recent years ............ 11
Figure 1.4. Sickness absence was very high in 2003 and remains so by international
standards ........................................................................................................... 15
Figure 1.5. Sweden is still the leader in long-term sickness absence.................................... 16
Figure 1.6. Large fluctuations in disability benefit inflow in Sweden .................................. 17
Figure 1.7. Sweden has recorded the largest increase in disability benefit
recipiency since 2000 ........................................................................................ 18
Figure 1.8. Mental health conditions are now the key concern in all OECD countries ......... 19
Figure 1.9. Outflow rates from disability benefits are low but have increased
in Sweden recently ............................................................................................ 20
Figure 1.10. Employment is low and unemployment high, but incomes are also high
and poverty is low ............................................................................................. 21
Figure 2.1. Swedish reforms in an international perspective: Not top but
very close to ...................................................................................................... 33
Boxes
Box 0.1.
Box 2.1.
Box 2.2.
Box 2.3.
Recommendations to improve the rehabilitation chain ........................................ 7
What has changed since 2006? ......................................................................... 23
Innovative practice: NBHW Sick-leave Guidelines .......................................... 28
Innovative funding to overcome administrative silos ......................................... 31
EXECUTIVE SUMMARY – 7
EXECUTIVE SUMMARY
Sweden is currently undertaking a series of extensive reforms to address long-term structural
problems with its sickness and disability policies. A new sick-leave process with a much stricter
timeline for work-capacity assessment has been put in place to facilitate the return to work. The
changes are far-reaching and in the right direction but given the breadth of reform and the size of the
problem, implementation remains a big challenge. More could and needs to be done to ensure that the
reforms live up to their promise. In particular, financial incentives remain weak for most players,
particularly employers and the health system. Co-operation among the key institutional actors also
needs to be strengthened in some areas.
Box 0.1. Recommendations to improve the rehabilitation chain
Key policy challenges
1.
2.
3.
Assessment of work capacity and of work
reintegration options happens far too late
Policy recommendations
•
Sickness certificates exceeding seven days
duration should be sent to the Social Insurance
Agency immediately to make random checks of
their validity via second medical opinions;
•
Where a worker takes more than a month’s sick
leave, automatically offer rehabilitation advice and
support to their employer to facilitate their return;
•
Use the FAROS model of co-operation between
the Social Insurance Agency and the Public
Employment Service for all clients who have
received a sickness benefit for 180 days.
•
Introduce co-payment of sickness benefits with the
county councils responsible for the health care
system, as an incentive to keep down sick-leave
duration and expedite return to work;
•
Provide a (medical) rehabilitation guarantee;
•
Report and sanction non-compliance of general
practitioners to the new sick-listing guidelines.
•
Develop clear standards for assessing employers’
efforts in work reintegration;
•
Increase the financial incentives for employers to
act to ensure sick workers resume work;
•
Improve co-operation between employers and the
Public Employment Service.
Medical authorities do not have sufficient
incentives to pursue timely work resumption
Employers have few obligations with respect
to their sick employees
8 – EXECUTIVE SUMMARY
The severe foreign exchange crisis which erupted in autumn 1990 caused an economic downturn
in the early 1990s that changed Sweden in ways that are still being felt. Unemployment jumped from
below 2% in the late 1980s to 8-10% in the mid-1990s, and overall dependence of the working-age
population on social benefits climbed from 12% to 20%. Initially, this growth in benefit use was
driven by high unemployment. From 1995 onwards, however, there was a sudden structural shift onto
long-term sickness and disability benefit: by 2004, 14% of the working-age population received either
sickness or disability benefit, the highest level in the OECD.
This led to much discussion at all levels of Swedish society and eventually to calls for stricter
application of existing legislation by the restructured Social Insurance Agency. This was, in turn,
associated with a fall in moral hazard and sickness absence levels, prior to significant changes in the
regulations.
In 2006, the new government which, during its electoral campaign, promised to reduce inactivity
took office. Since the total incapacity rate (taking sickness and disability together) was still extremely
high, it decided to change the system so that sick people were obliged to return to work faster or make
efforts to find other more suitable work at an early stage. The driving force behind this important
fundamental reform was evidence showing that the longer the period of inactivity, the less likely a
person was of ever returning to the labour market.
Some of the recent changes represent a radical departure from previous policies. The idea of
encouraging job mobility at an early stage is innovative and addresses one of the main causes behind
the high and sometimes still increasing levels of sickness and disability in many OECD countries.
Coupled with recent institutional adjustments, the Swedish reforms have the potential to reduce
dependency on long-term sickness and disability benefits and increase the employment rate of people
with disability.
That said, to ensure that these reforms live up to their promise further change is needed in a
number of areas. In particular, it appears that responsibilities and financial incentives for key actors are
not sufficient to ensure that the new rehabilitation chain will work as intended. Incentives to stay in
work are weak for workers; they are offered very high replacement income on a long-term basis
through collectively-agreed benefit top-ups. Supports and incentives for employers to retain workers
appear weak as do incentives in the health care system run by county authorities and among general
practitioners assessing work incapacity, to expedite return to work among those who take sick leave.
Finally, the political economy of reform remains an issue. These reforms represent a significant
departure from previous policy and smooth implementation and encouraging results are going to be
needed to win the hearts and minds of the Swedish population at large and the main stakeholders. This
challenge is going to be exacerbated by the unfolding economic downturn and in particular, increasing
unemployment over the next two years (OECD, 2008b).
CHAPTER 1. SETTING THE SCENE –
9
CHAPTER 1: SETTING THE SCENE
1.1.
Key trends since 1990
In Sweden, the 1970s and 1980s were a period of relatively stable economic growth characterised
by very high and increasing rates of employment, reaching 90% for the population aged 25-54, and
very low rates of unemployment, fluctuating at 2-3% (OECD, 1996). However, even then inactivity
due to worker incapacity was a major labour market issue. Sickness absence was very high with shortterm absence fluctuating significantly (OECD, 2005). Disability benefit recipiency was also
comparatively high and growing, from 5% of the working-age population in the mid 1970s to 7% in
1990, mostly as a consequence of the increased take-up by women, though this was partly a byproduct of their rising participation in the labour force.
The economic downturn in the early 1990s, caused by a severe foreign exchange crisis which
erupted in the autumn of 1990, marked a turning point in Sweden. Unemployment leapt to 8-10% and
remained at that level until 1998 (OECD, 2003a). Taking into account the additional numbers on
sickness and disability benefit, in the mid-1990s no less than 20% of the working-age population were
receiving a social insurance benefit – compared with 10-13% during the 1970s and 1980s.1 This
constituted a longer-term structural shift that still persists today with one in five working-age adults
relying on a social insurance benefit of some kind.
How can this be explained? While unemployment fell again to 5% in 2000/2001, most of this
increase was offset by an increase in the incapacity rate.2 In 1998, sick-leave of all durations and
inflows into disability benefit started to increase very rapidly (see Figure 1.1). Sick-leave with
duration of less than six months increased by 90% until early 2002, sick-leave of 6-12 months by
140% until mid-2002 and long-term sick-leave of more than one year almost tripled until 2003. The
annual inflow into disability benefit followed this trend, albeit with a delay, and more than doubled
until 2004. As a consequence, the total incapacity rate of the working-age population peaked at 14% in
2004/2005.
After reaching these peak levels, absence rates fell back to roughly 1998 levels in 2008 (only
sick-leave of over one year is still more frequent than it was ten years ago). However, the overall
dependence on social insurance benefits did not change very much, though this was partly because
unemployment rose to around 7%. This development highlights a strong negative correlation between
sickness absence and unemployment, at least at the national level, as has been found in several studies
in Sweden (e.g. Arai and Skogman-Thoursie, 2001; and Larsson, 2002).3
1.
Total recipiency of social benefits, including social assistance payments provided by municipalities,
was even higher, at around 23%.
2.
The term “incapacity rate” is used in this report to denote the total number of people on either sickness
or disability benefit in per cent of the working-age population.
3.
The pro-cyclical pattern of the aggregate Swedish sickness absence rate is partly due to absence-prone
workers being more likely to lose their job, as shown in Hesselius (2007).
10 – CHAPTER 1.
SETTING THE SCENE
Figure 1.1. The four waves of incapacity benefit growth until 2004
Cases of sick-leave and people awarded a disability benefit (monthly numbers)
Sick leave cases < 6 months
Sick leave cases 6 - 12 months
Sick leave cases > one year
Newly awarded disability benefits
a
160 000
140 000
120 000
100 000
80 000
60 000
40 000
20 000
0
a)
Sickness absence data are on a monthly basis, while the annual number of inflows into disability
benefit is divided by 12 to derive a monthly estimate.
Source: Swedish Social Insurance Agency.
Figure 1.2. A strong positive correlation between unemployment and disability across Swedish regions
Differences in percent from the overall rate in the country in 2007a
Disability benefit recipiency rate
%
Unemployment/population ratio
60
40
20
0
-20
-40
Gävleborg
Norrbotten
Jämtland
Västernorrland
Gotland
Blekinge
Dalarna
Örebro
Värmland
Östergötland
Kalmar
Västerbotten
Västmanland
Södermanland
Skåne
Halland
Västra Götaland
Jönköping
Uppsala
Kronoberg
Stockholm
-60
a)
Regions ranked by increasing order of the difference in their unemployment/population ratio from the overall
country ratio
Source: Swedish Social Insurance Agency and Public Employment Service.
CHAPTER 1. SETTING THE SCENE – 11
However, there is another mechanism at work. With sickness being the major gateway into
permanent disability benefit in Sweden as it is in most OECD countries, high sickness absence rates
have flowed on into increasing disability benefit recipiency (as shown in comparison with other
countries in Figure 1.7) – and these rates have not fallen to the same degree and certainly not as
quickly when unemployment rises, as it did in the 2002-2006 period. This is the second explanation
for the persistently high overall dependence of the working-age population on social insurance
payments – which is still close to 20% today.
Indeed, the relationship between disability and unemployment is quite a different matter,
especially at the regional level. Counties with higher rates of unemployment also tend to have higher
rates of disability benefit use (Figure 1.2), with a high statistical correlation of R=0.82. The causality
of this relation, however, is not a given, although it appears that, first, both high levels of
unemployment and high disability are indicators of a weak regional labour market and secondly, longterm unemployment is one of the risk factors in long-term disability (e.g. OECD, 2008a).4
The recent change in trends of benefit use shown in Figure 1.3 suggests that something different
is now happening in Sweden. In the past three years, sick-leave numbers fell sharply despite a
considerable increase in the number of employees. Until 2006, this change did not have an impact on
overall dependence on social insurance benefits, because both unemployment and disability benefit
recipiency increased. But in 2007, for the first time, employment increased at the same time as both
unemployment and sickness absence fell.
Figure 1.3. Sickness trend no longer follows the employment trend in recent years
Seasonally adjusted 3-month moving average, persons aged 16-64, 1993-2008a
Number of employed
Number of absent due to sickness
4 800
200
4 700
4 600
4 500
180
160
4 400
4 300
140
4 200
4 100
4 000
120
100
3 900
3 800
80
a)
Employment on left-hand scale, sickness absence (people absent the whole week due to sickness) on right-hand
scale.
Source: Statistics Sweden (LFS).
4.
Johansson and Palme (2002) show that higher local unemployment is also associated with higher
incidence of local sickness absence, together with a reduced likelihood of returning to work. Hence,
the pro-cyclical negative relation between sickness and unemployment on a national level over time
seems to go hand-in-hand with a positive association on a local level.
SICKNESS, DISABILITY AND WORK: BREAKING THE BARRIERS - THE CASE OF SWEDEN © OECD 2009
12 – CHAPTER 1.
SETTING THE SCENE
What is the reason behind this apparent shift in behaviour which seems to have started in 2004,
i.e. prior to the new government taking office, and which has accelerated in the past two years? This
question is explored briefly in the following section, covering the period until 2006, while policy
changes after 2006 are the subject of Chapter 2.
1.2.
Major reforms in the period 1990-2006
A.
The 1990s
Initially, the big economic downturn in the early 1990s opened a window of opportunity for
reform (following a period without any major reforms during the 1980s). This window was used for
various reforms of the sickness benefit scheme, especially:
•
The introduction of a 14-day sick-pay period covered by the employer as of 1992;
•
The (re-)introduction of a waiting day without any benefit payment as of 1993; and
•
Three waves of reductions in the sickness benefit level, in 1991 (75% of earnings in the first
three days and 90% until day 90 instead of 100%, and 90% instead of 95% thereafter), in
1992 (80% after day 90) and in 1993 (70% after the first year of absence).
The main purpose of these reforms in the early 1990s was to bring down public expenditures by
cutting payments to make short-term savings. The result was a sharp reduction especially in short-term
absences. Swedish workers were very sensitive to changes in the sickness replacement rate.5
The reforms undertaken to address the crisis, however, did not have lasting effects. First, because
of the urgency reforms were pushed through very quickly, without the normal consultation process.
They were not supported by the main stakeholders, especially the social partners. This lack of support
had two effects. First, reforms were at least partly undermined by corresponding increases in
collectively-agreed benefit top-ups (the replacement rates mentioned above include those top-ups)6.
Secondly, pressure to at least partly reverse the changes increased sharply when economic conditions
improved. Moreover, the changes in the early 1990s also had other undesired effects: the average
length of a sickness spell increased because workers tried to avoid facing another period of either no
pay (on the first day of absence) or low pay (on the second and third day).7 Not surprisingly, therefore,
in the second half of the 1990s compensation rates were partly increased again, offering 90% until the
end of the first year and 80% thereafter. This led to a rapid rise in sickness absence rates thereafter.8
5.
Various papers show a strong positive relationship between the sick-leave compensation rate and the
absence level (e.g. Henrekson and Persson, 2004), though separating out the effect is difficult because
changes in replacement rates coincided with other variations in the business cycle.
6.
Collective agreements also introduced different compensation levels across workers: municipal
workers and blue-collar workers have a higher compensation level from day 91 (90% instead of 80%).
7.
The initial idea with the 1991 reform was that it would increase the cost of beginning a work-absence
period, thus leading to a decrease in incidence. But the reform also increased the cost of returning to
work after day 90 so that workers on long work-absence spells increased their duration, as was found
in Johansson and Palme (2004).
8.
Hesselius and Persson (2007), for example, have shown that a 10 percentage point increase in the
replacement rate for absences of duration of 91-360 days, in 1998, led to an increase in the number of
The early 1990s also marked the starting point for changes in the disability and vocational
rehabilitation schemes. Vocational rehabilitation was reformed in 1992 with the aim of strengthening
rights and responsibilities of workers and the employers, to encourage early intervention, to improve
the coordination role of the Social Insurance Agency (SIA) and to open the provider market for private
operators. Relevant changes in the disability benefit scheme included the introduction of the “elderly
rules” in 1993 (when it was no longer possible for workers over age 60 to receive a disability benefit
on the grounds of labour market reasons though medical criteria continued to be enforced less strictly)
and the abolition of any special access conditions for workers over age 60 in 1997. The latter change is
one of the reasons for the particularly sharp increase, starting in 1998, in long-term sickness absence –
which is still much higher today than it was prior to 1998.9
There were additional factors explaining why reforms undertaken during the 1990s largely failed
in the longer run. Due to the lack of support from the key stakeholders, policy implementation was
very lax. Sickness monitoring, rehabilitation procedures and eligibility rules for disability benefits
were, in theory, relatively strict by international standards, but poorly applied or not at all10. General
practitioners were reluctant to deny sickness certificates to workers, despite a tougher set of rules
introduced in 1995.11 Employers failed to fulfil their obligation to undertake a rehabilitation
investigation, which should form the basis for the preparation of a rehabilitation plan prepared by the
SIA, without any consequences. Local social insurance offices faced strong incentives not to deny
benefits, especially disability benefits, with elected local politicians being involved in administering
the system.
B.
Since the turn of the century
System reform came back on the agenda when it became clear that long-term sickness and
disability was growing much faster than was fiscally tolerable. The far-reaching old-age pension
reform enacted in 1999, following a long and comprehensive reform process, also added to the
problem, as it left the disability benefit system (which was part of the pension system then)
unreformed. Not only did this suddenly make the disability benefit appear more attractive than an
actuarially reduced old-age pension, but in addition contributions to the new old-age pension system
came for free on top of the disability benefit payment.
In mid-2000, a government committee proposed far-reaching reforms including to: i) extend the
period of employer responsibility from 14 to 60 days; ii) introduce co-payments by the employer
throughout the sickness spell; iii) limit the period of sick pay to one year; iv) merge sickness and
disability insurance; and v) replace permanent disability benefit by a temporary activity benefit with
special work incentives (for those aged 19-29) or a temporary sickness compensation (for those
aged 30 and over).
absences of such duration by, on average, 4.7 days and correspondingly an increase in the overall
costs of the national sickness insurance by 3%.
9.
Studying the impact of the 1997 reform, Karlström et al. (2008) found that, rather than leading to
higher employment of the 60-64 age group, sickness and unemployment insurance absorbed many of
those no longer entitled to disability insurance – the well-known communicating vessels effect.
10.
According to a study by Ahlgren et al. (2008), the proportion of clients on sickness benefit who
received vocational rehabilitation measures varied across SIA offices from 1.2% to 8.7%.
11.
Söderberg and Alexandersson (2005) and Söderberg and Mussener (2008) found that doctors often
fail to provide sufficient information concerning work capacity.
14 – CHAPTER 1.
SETTING THE SCENE
Resistance to reform by the social partners continued, but the poor outcomes allowed the
government to introduce some changes. Sickness and disability insurance was merged in 2003, as
proposed by the Committee, with slightly different rules for those younger and older than 30 years, but
with no change in benefit levels. The proposal to introduce a time limit for sickness benefits was
dropped but the employer period was increased to 21 days in 2004. This change was reversed again
in 2005 when employers, in addition to being fully responsible for the cost of sickness absence for the
first 14 days, had to co-finance 15% of the sickness compensation costs after the second week of
absence and continuously throughout the sickness spell.
The most important change probably, however, was the restructuring of the SIA in 2005. Prior to
this, the SIA was comprised of 21 semi-autonomous regional offices; decision processes differed
largely, as did the outcomes in terms of benefit grants (as shown in Figure 1.2). Today, the SIA has a
centralised administration thus bringing much greater consistency and purpose to the form and quality
of frontline services. In addition, already in 2003, cooperation between the SIA and the Public
Employment Service (PES) was improved, with a focus on long-term sickness benefit clients.
Sickness absence levels had already started to fall rapidly in 2003 (and in 2004 for absences of
more than one year), and disability benefit inflows followed this trend in 2005. Analysts and policy
makers generally agree that this fall was not brought about by a substantive change in regulations
(essentially eligibility criteria, monitoring criteria and assessment procedures remained unchanged),
but by a gradual improvement in the way existing regulations were being implemented.
This seems to have gone hand-in-hand with a change in social attitudes and norms, especially in
regard to moral hazard in connection to the use of sick-leave on an ongoing basis. This is also
reflected in a change in the process for granting sick-leave certificates by General Practitioner’s
(GP’s), which is now done according to new guidelines. Though the first of these were formally
introduced in 2007 (see Chapter 2) the process for developing them – which started several years
earlier – had an impact on public attitudes. All this seems to reflect a gradual shift in policy consensus
away from passively providing easily accessible replacement income to actively promoting
participation in work. This provided a promising starting position for the new government, which took
office in 2006 with the aim of reducing inactivity significantly.
Indeed, current reforms are very special and promising for one particular reason: this is the first
time in the history of Swedish sickness benefit policy-making that structural change is being
undertaken during a period of falling sickness absence. This suggests the reforms have considerable
potential for breaking the pro-cyclical link between unemployment and sickness, even though the
recent economic downturn might delay this success.
1.3.
How Sweden compares with other OECD countries
To better understand the need for reform of sickness and disability schemes in Sweden, it is
helpful to compare outcomes with those in comparable OECD countries. In the following section, five
countries which were reviewed by the OECD over the past three years are used as a benchmark: the
other three Scandinavian countries (Denmark, Finland and Norway) and two other wealthy and small
European economies (Netherlands and Switzerland). One has to keep in mind, however, that all of
these countries are facing problems and seeking to reform their schemes. For example, in all countries
spending on disability benefits is more than twice the OECD average.
A.
Sickness and disability benefit
With almost 10% of workers absent from work at any time, the sickness absence rate in Sweden
was huge only a few years ago, and much higher than elsewhere12. The fall in absence levels after 2002,
however, was equally remarkable as the increase in the period 1998-200213. Nevertheless, also today, at
6%, absence is still higher than in most other OECD countries, except Norway (Figure 1.4, Panel B).
Measures based on self-reporting, via Labour Force Surveys, confirm this: 3.5% of Swedish (and
Norwegian) workers report to have been absent due to sickness during the whole week before the
interview. This is twice the average for European OECD countries (Figure 1.4, Panel A).
Figure 1.4. Sickness absence was very high in 2003 and remains so by international standards
Share of workers absent from work (A) and share of work days lost (B), 1995-2007a,b,c
A. Self-assessed absence rates
Denmark
Finland
Netherlands
B. Social insurance-based work days lost
Norway
6
12.0
5
10.0
4
8.0
3
6.0
2
4.0
1
2.0
0
0.0
Sweden
Switzerland
OECD
a)
Panel A gives the number of employed persons reporting not having worked at all during the week prior to being
interviewed, due to illness, injury or temporary disability.
b) Data in Panel B were derived in the following way: the total number of annual absence days, unless available
directly, is calculated by multiplying the number of spells by the average duration of each spell. This result is
divided by the labour force resulting in the average number of days of sickness per person. These figures are
further divided by the number of actual working days (the number of statutory minimum annual leave and paid
public holidays are removed) in each country.
c) Annual absence days in Panel B are exclusive of both short-term absences covered by employer-paid sick pay
and waiting days, i.e. absences of 1-9 days in Finland, 1-14 days in Denmark, 1-16 days in Norway and
1-15 days (and 1-22 days as of 2003) for Sweden. Data for the Netherlands, where the employer-period is two
years, exclude absences of 1-7 days.
Source: EULFS for Panel A, data supplied by national authorities (Social Insurance Agency for Sweden) for Panel B.
12.
Only in the Netherlands, in the early 1980s, was absence rate at a comparable level. This was one of
the driving forces behind the radical changes to its sickness benefit scheme, and later on also to its
disability and vocational rehabilitation schemes (OECD, 2008).
13.
Part of the decline in the absence rate in Sweden from 2003 to 2004 (as measured by administrative
statistics, i.e. Panel B) is due to the lengthening of the employer-paid period, which is not covered in
the data, from two weeks to three weeks (reduced again to only two weeks as from January 2005
when the co-payment was introduced). On the other hand, although even now one in ten new sick
leaves extends beyond one year, the percentage of sickness benefits terminated between day 30 and
day 90 has increased every year since 2005.
16 – CHAPTER 1.
SETTING THE SCENE
The main explanation for the high overall sickness absence level in Sweden is the extremely high
share of long-term sickness absence – with Sweden being the only country in this sample with no time
limit on sickness benefit until recently14. For instance, absences of more than six months comprise no
more than 10% of all absences in most countries, but around 20-25% in the Netherlands (which has a
two-year time limit) and in Norway, and exceed 50% in Sweden (Figure 1.5). Short-term absence is,
therefore, even lower in Sweden than it is in many other countries.
Figure 1.5. Sweden is still the leader in long-term sickness absence
Long-term sickness absence spells as a share of all absence spells (percentage), 1998-2007a
A. Absences of six or more months
Denmark
Finland
B. Absences of one or more months
Netherlands
100
100
90
90
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
Norway
Sweden
a)
Annual absence days are exclusive of both short-term absences covered by employer-paid sick pay and waiting
days as in Figure 1.4.
Source: Administrative data supplied by national authorities (Social Insurance Agency for Sweden).
Sickness absence levels are critical for the development of the inflow into disability benefits,
given that in most countries the majority of new disability benefit claimants would come into the
system following a period on sickness benefits. In Sweden, this is now true for around three-quarters
of all new claims (while it was more than 85% until 2005). Comparable figures in other countries are
over 95% in Norway, where many people are going through an intermediate phase of medical and/or
vocational rehabilitation, 85% in the Netherlands, 60% in Finland (where another 26% enter via a
period of unemployment) and 50% in Denmark (where another third enters via social assistance).15
Trends in the annual rate of inflow into disability benefit in Sweden reflect the large fluctuation
over time in sickness absence levels, as do the rates in Norway. The level of inflows oscillates around
1% of the labour force per year, in both Norway and Sweden; this is slightly higher than in Finland
and much higher than in Denmark and Switzerland and, since recently, also in the Netherlands
(Figure 1.6). The latter country is an example of how large the impact of far-reaching benefit reform
can be: by significantly increasing the financial responsibility of employers and the financial
incentives to work for workers (OECD, 2008), inflow rates in the Netherlands dropped from over 1%
annually up until 2002 to only about 0.4% in the most recent year.16
14 .
The only other OECD country with no time limit for sickness benefits was Ireland, which is going to
introduce a two-year limit for its Illness Benefit in 2009.
15.
More details on pathways into disability benefits can be found in OECD (2006, 2007 and 2008).
16.
After a number of transitional changes, the longer-term structural inflow rate into disability benefit in
the Netherlands is projected to stabilise at around 0.5% – half the level prior to reform.
Figure 1.6. Large fluctuations in disability benefit inflow in Sweden
Disability benefit inflows per 1000 of the working-age population, 1990-2007
Denmark
Finland
Netherlands
Norway
Sweden
Switzerland
16
14
12
10
8
6
4
2
0
Not surprisingly, the high inflow rates in Sweden and Norway have led to a continuous increase
in the total disability benefit recipiency rate, which is now slightly above 10% in both countries
(Figure 1.7, Panel A). The increase was much less pronounced in Finland, because the average new
claimant is older and the average duration of being on disability benefit shorter. The example of
Switzerland shows that at a lower initial level of benefit receipt, lower inflow rates would also produce
rising disability benefit recipiency levels. The example of the Netherlands shows that falling inflow
rates will also eventually translate into falling recipiency levels. However, this finding is partly
explained by the reassessment of entitlements over the past three years of Dutch disability benefit
recipients under age 45, which has indeed led to either a reduction or a loss of benefit in one of three
cases. This is in sharp contrast to reforms in most other OECD countries, including Sweden, which
tend to grandfather the entitlements of current recipients.
Panel B of Figure 1.7 shows that the increase in disability benefit recipiency rates in Sweden
since the mid-1990s was by far the largest for young workers: 80% for those aged 20-34 years. This is
a more general phenomenon also, though to a lesser extent, found in Norway, Denmark, Finland and
the Netherlands, where trends for the youngest age group go against the general trend Switzerland
seems to be an exception). The same trend is found in other countries (OECD, 2007). The result of this
general phenomenon is that the average recipient is getting younger and the average duration of
benefit receipt longer – increasing the total numbers on disability benefit and the fiscal costs of the
programme accordingly.
18 – CHAPTER 1.
SETTING THE SCENE
Figure 1.7. Sweden has recorded the largest increase in disability benefit recipiency since 2000
Disability benefit recipiency rates and change in the beneficiary rates by broad age group (percentage)a
A. Num ber of disability beneficiaries
as a percentage of the w orking-age population (20-64), 1990-2007
Denmark
Finland
Netherlands
Norway
Sweden
Switzerland
12
10
8
6
4
2
0
B. Percentage change in the beneficiary rate by broad age group
since m id/late-1990s b
20-34
90
80
70
60
50
40
30
20
10
0
-10
-20
-30
-40
-50
35-49
Average 20-64
50-64
80.2
46.7
47.5
36.0
24.6
34.8
24.7
10.9
7.2
5.1
6.1
-1.2
-4.2
-20.9
-10.9
-18.2
-22.5
-35.1
Denmark
Finland
Netherlands
Norway
Sweden
Switzerland
a)
Beneficiaries: disability pension (Denmark, Norway, Sweden, Switzerland); earnings-related and/or national
disability pension (Finland); Wajong, WAO and WIA disability benefit (Netherlands).
b) In Panel B, the period covered is 1995-05 in Denmark, 1999-2007 in the Netherlands and 1995-2007 in all other
countries.
There is another phenomenon throughout the OECD, which is closely related to this shift in the
age structure of new and current claimants. Increasingly, disability benefits are being claimed on the
basis of mental health problems. These conditions now account for some 70% of the inflow into
disability benefits among younger adults in most countries, and for around 40% across all age groups.
Sweden is no exception to this trend, although the change since the mid-1990s seems even faster than
in most other countries; for instance, for the total population the share of the inflow caused by mental
ill-health doubled from 20% to 40% within only 12 years.
Figure 1.8. Mental health conditions are now the key concern in all OECD countries
Distribution of total inflow to disability benefits by health reason and age, around 1995 and 2007
(percentage, total in each age group equals 100)a
2007
80
Finland
80
Other
Muscular-skeletal
Mental
Other
Total
50-64
35-49
Total
50-64
35-49
20-34
20-34
Other
Muscular-skeletal
Mental
Total
50-64
35-49
20-34
Switzerland
Total
Total
50-64
35-49
20-34
Total
50-64
35-49
20-34
Total
0
50-64
10
0
35-49
10
0
20-34
10
Total
20
50-64
30
20
35-49
30
20
20-34
30
Total
40
50-64
50
40
35-49
50
40
20-34
50
Total
60
50-64
60
35-49
60
20-34
70
Mental
50-64
Sweden
70
Mental
Total
Muscular-skeletal
70
Muscular-skeletal
50-64
20-34
Total
50-64
35-49
Other
35-49
80
Norway
Mental
20-34
Muscular-skeletal
20-34
20-34
Other
Total
80
Mental
50-64
Muscular-skeletal
Total
0
50-64
0
35-49
0
20-34
10
Total
20
10
50-64
20
10
35-49
20
Total
30
50-67
30
35-49
30
20-34
40
Total
40
50-67
40
35-49
50
20-34
60
50
Total
60
50
50-67
60
35-49
70
20-34
70
35-49
Netherlands
70
35-49
80
Denmark
20-34
80
1995
Other
a) First year is 1999 for the Netherlands and 2000 for Denmark and Finland; second year is 2005 for Norway.
There is much uncertainty about the reasons behind this phenomenon. Epidemiological and
medical studies generally agree that the prevalence of mental ill-health as such has not increased
significantly among the general population. Explanatory factors, therefore, include the reduced stigma
on mental health problems and, associated with this, the higher frequency of doctors identifying
mental ill-health as the main illness (rather than a co-morbidity), and the shift in the industry structure
of the labour market which has resulted in increasing average psychological demands of work.
20 – CHAPTER 1.
SETTING THE SCENE
One of the reasons for the consistently high, and sometimes still increasing, numbers of people on
disability benefit is the permanent character of these payments. Throughout the OECD, very few
people ever exit disability benefits, especially to return to work. In most countries, including until
recently Sweden, the rate of annual outflow is around or even below 1% of the recipiency population
(Figure 1.9). Only very few countries have higher outflow rates, including the Netherlands which has
done a full review of entitlements of all recipients under age 45 over the past few years, which has
seen outflow rates rise to as much as 5% in peak years (and 3% in the last year). In Sweden, rates of
outflow have long fluctuated around 1% but they have almost doubled recently – to reach 1.9% in
2007 and probably around 2.3% in 2008 (provisional OECD estimate). This outcome is a promising
response to the recent policy changes.17
Figure 1.9. Outflow rates from disability benefits are low but have increased in Sweden recently
Annual outflow from disability benefits as a share of all disability benefit recipients (percentage), 2007a
6
5
4
3
2
1
0
Finland
Netherlands
Norway
Sweden
Switzerland
a) All outflows, excluding deaths and transfers to old-age pension. Data for Finland refer to 2006.
B.
Social and economic integration of people with disability
Sickness and disability schemes provide key outcome indicators for policy makers. A different
but equally important aspect for disability policy is the social and economic integration of people with
disability. Measuring the latter is not straightforward because, unlike unemployment for example,
disability and impaired health is not a clearly identifiable dichotomous category but a complex concept
influenced as much by personal characteristics as by social and environmental factors and barriers.
The following indicators are based on self-assessed disability, as measured by the European Survey of
Income and Living Conditions (EU-SILC).18 On the basis of this indicator, almost 20% of all Swedes
aged 20-64 classify themselves as having a disability (the share is even higher in Finland but slightly
lower than this in the other four countries).
17 .
More detailed outflow data for Sweden suggest that around one-third of those who leave disability
benefit move into work, one in four into unemployment and one in six each onto either another benefit
or into full-time education.
18 .
A person is classified as having a disability if a) having a chronic health problem, illness or disability
and b) being moderately or severely hampered in activities of daily living by this health condition.
Figure 1.10 shows that Sweden is doing comparatively well on some indicators of social
integration of people with self-assessed disability. Employment rates of people with disability are only
slightly above 50% but they are not higher in other better-performing OECD countries.19 Relative to
their peers without disability, employment rates in Sweden stand at around 62% – roughly the same
value that is found in Denmark and Switzerland, with only Finland having a relative rate of over 70%.
Figure 1.10. Employment is low and unemployment high, but incomes are also high and poverty is low
Employment rates, unemployment rates, individual incomes and poverty rates: people with versus people without
disability, age group 20-64, absolute (left-hand scale) and relative (right-hand scale), latest available yeara,b
Disability (D)
No disability (ND)
Relative D/ND (right axis)
A. Employment rates
B. Unemployment rates
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
90
80
70
60
50
40
30
20
10
0
Denmark
Finland Netherlands Norway
15
2.5
12
2.0
9
1.5
6
1.0
3
0.5
0
Sweden Switzerland
C. Average incomes (all persons = 100)
110
100
90
80
70
60
50
40
30
20
10
0
Sweden Switzerland
Sweden Switzerland
D. Poverty rates (at 60% on median income)
1.1
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
Denmark
0.0
Denmark
30
3.0
25
2.5
20
2.0
15
1.5
10
1.0
5
0.5
0
0.0
Denmark
Sweden Switzerland
a)
Definition of disability on a self-assessment basis. Denmark, Finland, Norway and Sweden: existence of a chronic
health problem or disability and long-term limitations in daily life activities; the Netherlands: suffering from a longlasting complaint, illness or disability which impedes carrying out or obtaining a paid job (“work disabled”);
Switzerland: persons with reduced capacity due to a long-lasting health problem of more than a year.
b) Poverty rates: percentages of persons with disability in households with less than 60% of the median adjusted
disposable income.
Source: Denmark and Norway: LFS 2005; Netherlands: LFS 2005/2006; Finland and Sweden: EU-SILC 2005; Switzerland: LFS
2005 for employment and unemployment, Health Survey 2002 for income and poverty.
Sweden is not doing as well in terms of unemployment rates, with over 12% of all people with
disability being unemployed. On this account, among the countries compared, only Finland is
performing worse. In most countries, including Sweden, unemployment is around twice as high for
people with disability as for those without disability.
As in most OECD countries, individual incomes of people with disability are only 10 percentage
points lower than for the population as a whole. Big differences across countries, however, are found
in terms of poverty risks: in some countries, including Sweden but also Norway and the Netherlands,
poverty rates do not vary with disability status while in the other countries poverty rates of households
with a person with disability are 60-80% higher than for other households.
19.
Employment rates of people with disability are significantly lower than this in some other OECD
countries, including, for example, Ireland and Spain (around 35%) and Poland (less than 20%).
22 – CHAPTER 1.
SETTING THE SCENE
In conclusion, the following facts emerge in comparing Swedish sickness and disability policy
outcomes with those in other OECD countries:
•
Sickness absence rates are still high although they have fallen considerably in the past few
years. However, long-term sickness absence in particular remains much higher than
elsewhere in the OECD.
•
Inflows into disability benefit, despite large variation over time and a falling trend in recent
years, are among the highest in the OECD, in turn contributing to the very high disability
benefit recipiency rate of over 10% of the working-age population.
•
The increase in disability benefit recipiency was particularly large for adults aged 20-34; this
is a general trend in many OECD countries but it is more evident in Sweden.
•
Outflows from disability benefit used to be as low as in most other OECD countries until
around 2004, but have risen steadily and significantly to around 2% annually since then.
•
The share of mental health conditions among disability benefit recipients has increased
rapidly in the past decade and has now reached 40%. Again, this is a universal trend across
the OECD, with Sweden being among the “front-runners”. Of particular concern is the
significant increase in young people with mental health problems.
•
As in most OECD countries, employment rates of people with disability are only around
60% of those of their peers without disability, while unemployment rates are almost double.
•
Poverty rates do not vary with disability as is the case in a number of other OECD countries.
In most countries, households with a person with disability usually experience a higher risk
of being in poverty.
The following chapter summarises what the new Swedish government has done in the past two
years to address these key challenges so as to improve outcomes.
CHAPTER 2. RECENT AND ONGOING REFORMS – 23
CHAPTER 2: RECENT AND ONGOING REFORMS
The current Alliance for Sweden government was elected in 2006 with a mandate to restore the
work-first principle and address labour market exclusion arising from long-term benefit receipt. This
vision is at the heart of its proposed theme of Social Europe starts with a job for Sweden’s upcoming
presidency of the European Union in the second half of 2009. When the government came into office
in 2006, almost 30% of the working-age population was unemployed, underemployed or receiving
other social benefits, and its initial reforms focused on unemployment. Some 200,000 people have
joined the labour market since then. More recent changes have been concerned with advancing
employment possibilities for those affected by sickness and disability.
The government’s reforms were predicated on an election mandate to address labour market
shortages, as well as the cost of high numbers of unemployment, sickness and disability beneficiaries.
The challenge for the government has been the cultural shift away from Sweden’s strong historical
attachment to the notion of a social welfare safety net and high moral hazard toward using benefits by
many of those who can actually work.
Box 2.1. What has changed since 2006?
Situation in 2006
Unlimited sickness benefit duration
The employer finances the first 14 days of sickness
absence and 15% afterwards, and is required to
prepare rehabilitation investigation
Disability benefit can be either temporary or
permanent
Disability beneficiaries are entitled to their benefit if
they attempt work for up to two years; they will be
reassessed if at work for longer
No tax advantage for employing a person with
disability
Situation in late 2008
Sickness benefit for a maximum of one year, but only
if after 180 days there is no work capacity to perform
any job. Prolonged sickness benefit can be granted
for a maximum of 550 days
The employer finances only the first 14 days, and may
be asked to provide the SIA with information it needs
for rehabilitation planning. The SIA can demand that a
sick worker request from their employer a certificate
showing what has been done to accommodate the
employee
Disability benefit is only granted for permanent
reductions in work capacity
Disability beneficiaries are guaranteed not to be
reassessed if they attempt paid work and are allowed
to earn a substantial amount of income and still keep
their benefit
“Special new-start jobs” subsidise employers with an
amount equal to twice the employers’ contributions
when hiring long-term unemployed and individuals
previously on sickness, rehabilitation or disability
benefits
24 – CHAPTER 2. RECENT AND ONGOING REFORMS
2.1.
Benefit reforms
Following reforms to tackle unemployment, the government more recently introduced policy and
system changes to address the high numbers of sickness and disability benefit recipients. The aim is
twofold: i) to avoid long-term sickness and disability benefit claims; ii) to encourage those furthest
from the labour market on a permanent disability benefit back into work.
A.
Sick-leave benefits: workers’ rights and responsibilities
One of the more striking features of Sweden’s revised sickness benefits policy and its
corresponding rehabilitation-chain model is that recipients are being seen for the first time as actively
responsible for adapting to their changed circumstances and staying in whatever work they are able to
perform. In the past, these individuals were considered as incapacitated and essentially passive
recipients of assistance from the SIA and their employer. Sweden’s historically high rates of sickness
absence and the high sensitivity of such absence to compensation levels (Chapter 1) indicate the
presence of high moral hazard, with inappropriate sick-leave use, including by persons experiencing
burn-out or wanting a career change.20 In this regard, the change in policy approach makes a clear
distinction between the problems of “being in the wrong job” and of experiencing a genuine reduction
in employability/work capacity following sickness.
The new rules put the onus on the sick workers to take the lead in commencing dialogue at an
early stage with their employers to find ways of maintaining their existing employment. The purpose
of this is to minimise deterioration in their work-readiness that would otherwise result from prolonged
benefit receipt and which in extreme cases leads to permanent incapacity and exclusion from the
labour market.
The use of certificates that formally document what action has been taken to return a sick leave
beneficiary to work, are a tangible example of this shift in expectations. From January 2008, the SIA
has been able to demand that a sick leave beneficiary approach their employer for a certificate
showing what options there are for adjusting the workplace so that the sick worker can continue to
work. The intent of this is to make the employee more active in prompting their employer to find ways
of accommodating them back into work. An employer who does not issue this certificate will receive a
further request directly from the SIA and, failing this, can be fined for non-compliance.
From July 2008, a sick worker who advises an employer that they are unable to work receives
wage payments from their employer for the first 14 days (with a one-day waiting period). Beyond this
period, the employer notifies the SIA which commences processing of the worker along a
rehabilitation chain and payment of sickness benefits.
During the first 90 days in which a person receives sickness benefits, they are expected to try to
find a way to resume their existing job, possibly with some modification of duties but no change in
salary or other non-salary benefits. Between the 90th and 180th day of sickness benefit receipt, if the
worker cannot perform their old job, they are expected to pursue one of the following two options:
•
20 .
To cooperate with their employer to try to find another job in that business, including jobs
which may offer lesser total remuneration.
Anecdotal evidence suggests that half of all absences are work or workplace related.
CHAPTER 2.. RECENT AND ONGOING REFORMS – 25
•
To take leave of absence from their current employer for up to six months in order to try out
another job with another employer. During this time the individual’s original employment is
protected. During such leave of absence workers can also choose to register as unemployed
and receive unemployment benefit and vocational rehabilitation services from the PES21.
After 180 days, the intent is to assess these clients against all jobs in the labour market if they
have some remaining work capacity. If it is likely that they will return to work within 12 months from
the first day of absence because they are already working part-time or following rehabilitation, for
instance, this work-capacity assessment may be postponed. If the person is judged as having remaining
work capacity, they are expected to resume work with their employer. If they cannot do so, they can
seek a new job with the support of the PES and, if they have unemployment insurance, they can also
receive unemployment benefits. Otherwise, they may be entitled to social assistance, depending on
their family income and assets. In cases where the person is deemed to have no remaining work
capacity, they are assessed for a disability benefit. While entitlement for sickness benefits usually
ceases after a year,22 responsibility of employers for sick workers remains so long as a workplace
agreement exists.
B.
Sick-leave benefits: employers rights and responsibilities
Employers in Sweden have primary responsibility for rehabilitating workers who take sick leave
and for acting to provide a safe and healthy workplace. Larger business may have safety committees
appointed by trade unions that monitor compliance and safety issues, and who can report violations to
the Working Environment Authority (WEA) if necessary. The Swedish system relies on employer’s
performing their obligations relating to worker rehabilitation and accommodation under the Workplace
Environment Act, and on trade unions and the WEA for enforcement.
An employer is obliged to help a staff member whose ability to perform their job becomes
affected by sickness, to resume work in the same or another job in their business, or else to support
them in securing more suitable work with another employer. As noted earlier, the SIA can ask a
worker to obtain a certificate from their employer to show what options there are for adjusting the
workplace to accommodate the worker. Only when an employer can show they have tried everything
reasonable to accommodate the worker, negotiations to terminate the employment contract can
commence with the involvement of their trade union. Employers who terminate an employment
contract without fulfilling the aforementioned obligations can be sued by the staff member or their
trade union for an unfair dismissal, with a penalty equivalent to as much as 32 month salary23.
The new rules include a legal right for an employer to ask for a doctor’s certificate from the first
sick day because it is well-established that such increased monitoring reduces moral hazard or
inappropriate sick-leave usage (Hesselius et al., 2005). On the other hand, the new rules remove a
number of employer obligations toward sick workers. Firstly, the 15% co-payment of sickness benefit
costs introduced a few years ago has been abolished. Employers are also no longer obliged to
undertake a formal “rehabilitation investigation” that used to feed into a “rehabilitation plan” prepared
by the SIA for sick workers. Employers are now only required to respond to questions from the SIA as
21 .
A sickness beneficiary is not ordinarily entitled to seek help from the PES without a referral from the
SIA, whereas unemployed persons can.
22 .
In exceptional circumstances where payment is continued for up to 550 days if this is likely to enable
a worker to return to their original job.
23 .
For repeated breaches an employer can be prosecuted by the WEA.
the latter start to prepare a plan. The main argument behind this change being that the compliance
burden was too high for the many small businesses that constitute the vast majority of employers and
most did not undertake these investigations anyway.
C.
Sick-leave and disability benefits: the role of the SIA
As discussed above, the SIA has an important role in establishing medical confirmation of a
worker’s eligibility for sickness benefits and formulating a rehabilitation plan in concert with the
person, their employer and the PES. With the new sickness system in place, this role is changing: it
now involves working in collaboration with the PES to help sickness beneficiaries stay in or find new
work. The aim is to ensure access to the support available at the PES to help the person maintain their
existing employment or find other, more suitable employment. The regular collaboration should
include a contact meeting after 90 days of sickness absence and a so-called hand-over meeting after
180 days, i.e. when the sickness benefit entitlement is likely to expire.
The new sickness benefit process also has a number of repercussions on the disability benefit
process and the role of the SIA in this regard. With the introduction of the new rehabilitation chain,
disability benefits can only be granted by the SIA after a person’s work capacity has been assessed as
being permanently reduced; granting a disability benefit on a temporary basis for temporary incapacity
is no longer possible. This makes it even more critical to secure proper assessments at the different
stages of the rehabilitation chain. The elimination of long-term sickness benefit entitlements cannot be
cushioned or undermined by more lenient granting of temporary disability benefit entitlements. The
effectiveness of this will entirely depend on the way the new regulations are applied. SIA decision
makers might feel pressure to assess a temporarily disabling condition as permanent to avoid too many
disability benefit refusals. This, however, would conflict with and nullify the objectives of the reforms.
D.
Encouraging persons with disability back into the labour market
An innovative approach to enticing persons assessed as having a permanent disability back to the
labour market will commence in January 2009. This initiative was launched because, there was a view
that in the 1990s and early 2000’s, people were transferred to disability benefits without a thorough
work capacity assessment and that investigations found around half had some residual work capacity.
All persons who have been designated eligible for permanent disability benefits will be encouraged
through a financial incentive to attempt to return to the productive labour market in whatever capacity
they can manage. This encouragement will take the form of allowing persons on a full disability
entitlement to earn up to 42,800 SEK per year before their benefit starts to progressively reduce.
Moreover, all such recipients will be allowed to cease work and resume their disability benefit at
anytime and without reassessment. Allowing them to resume benefits at anytime and without
hindrance helps overcome their fear about failing in the attempt and having to endure a long and
drawn-out re-assessment process.
This policy may also support persons whose ability to cope with incapacity improve over time
such that they develop some productive labour to contribute. Providing them with a financial incentive
to work may induce them back to the labour market. This scheme is also likely to suit persons with an
episodic health condition. An additional attraction of this policy is that any work and income taxes
these persons contribute to the economy are a bonus obtained at minimal cost to the state.
To help facilitate employment for persons with disability, employers who hire individuals
previously receiving a sickness or a disability benefit are eligible for a tax reduction equivalent to
twice the employers’ social security contribution. The longer such a newly-hired person had been
inactive, the longer the period of time that employers’ social security contributions are reduced. Over a
period of five years, this would constitute approximately half of the total non-wage cost. The employer
is also not obliged to pay the first 14 days of sickness absence for employees previously receiving a
disability benefit. In addition, an in-work tax credit was introduced to increase the supply of labour,
generating further incentives for people with disability to take-up work24.
E.
Employment programmes for persons with disability
In response to disappointing results of evaluations of active labour market programmes, the new
government reallocated funding from these programmes toward incentives to encourage persons with
disability back to the workplace. Approximately 14 billion SEK has been allocated to facilitate
employment of 90,000 persons with disability, either through wage subsidies or Samhall25 jobs for
people with very severe disability.
Wage subsidies are used by the PES as direct incentives to get employers to take on people with
less severe disability. Such clients are referred by the PES to potential vacancies and if there is a
possibility of employment, a temporary wage subsidy is negotiated with the employer. The subsidy
can cover up to 80% of the wage or be used to subsidise the cost of a job coach.
A new three-step approach was launched in 2006 to manage clients into work for whom the
current array of instruments was insufficient. The first step includes assessment and guidance,
followed by “development employment” (step 2) and “security employment” (step 3). Development
employment is a temporary stage which cannot last more than one year, while security employment
can be a permanent stage. The new approach will be evaluated in 2009. Initial results show that the
new guidance step is not being used as much as expected because PES caseworkers prefer the
traditional guidance which allowed for a longer time for assessment (six months instead of three).
The government is also considering wage subsidies for promoting entrepreneurship among
people with disability in the 2009 bill. The government is also interested in increasing funding for
supported employment and personal assistants.
2.2.
Institutional reforms
The new government continued and extended structural reforms to welfare institutions to support
the abovementioned policy changes. Formal guidelines regarding appropriate periods of sick-leave
absence for various sickness conditions have been developed to help minimise the amount of leave
that GPs grant to sick people. The major public institutions responsible for administration of benefits
and supporting beneficiaries to return to work have been restructured or reorganised to operate in a
more centrally directed and coordinated fashion, and with a clear focus and purpose of helping
beneficiaries return to work as quickly as possible. Finally, the government is funding the PES and
county authorities to support the entry and growth of the necessary providers of vocational and
medical rehabilitation services to support the policy changes (see below).
24 .
Estimated labour supply effects of the reform are high; in the case of single mothers, for instance,
working hours are predicted to increase by 3% and social assistance participation to decrease by 20%.
The impact is predicted to be much higher for low-income households (Aaberge and Flood, 2008).
25 .
Samhall was originally a government-owned company which became a limited company in 1992. It
operates across the 24 counties in Sweden. According to legislation, 40% of the employees must have
a severe disability and employment of individuals with multiple disabilities is actively encouraged.
Samhall receives a state subsidy covering most of the wages paid to its employees.
A.
Constraining medically determined sick-leave
A worker seeking a medical sick-leave certificate in Sweden will now more likely find that their
GP limits the amount of time off work to the minimum period appropriate for their particular
condition, thanks to an important supporting component of the reforms led by the National Board of
Health and Welfare26 (NBHW) in partnership with the SIA.
In the past, GPs awarded varying durations of sick leave for the same condition and due to patient
demand characteristics, sometimes tended to err on the high side. While specific recommendations on
the appropriate time for sick-leave for different diseases have been issued, GPs can award higher-thanrecommended absence periods but are required to provide written justification for why the extra time
off work is necessary. Though the SIA’s purpose is to minimise inappropriate use of sick-leave
benefits, the NBHW is promoting the change among GPs as a culture shift in the way they prescribe
sick leave; that it should be used sparingly because it is “good medicine” to keep people in work
where possible to minimise the health, social and economic problems arising from labour market
detachment.
The broad rationale behind this innovation is that excessively long sick leave may be medically
detrimental for some conditions. It also detaches a person from the labour market during which time
their work confidence and readiness deteriorates. In the past this has led to many persons becoming
excluded from the labour market for extended periods or even indefinitely – even if they recover from
the original illness. By way of example, the guidelines for General Anxiety Disorder recommend that
sick leave be minimised because an affected individual is more likely to excessively ruminate if
socially isolated. Another good example is absence leave following coronary surgery. In this case four
weeks leave is recommended as sufficient because resuming activity after this time assists healing and
results in a better medical prognosis.
Box 2.2. Innovative practice: NBHW Sick-leave Guidelines
The guidelines developed by the NBHW prescribe appropriate periods of sickness absence for the 90
ICD-10 medical conditions that account for approximately three quarters of the sickness leave taken in Sweden.
The NBHW guidelines are intended to make the medical decision-making process for granting sick leave more
homogenous and transparent, and to minimise the awarding of inappropriately long sick leave.
The period recommended for each ICD-10 condition was determined through a series of consultations with
groups of medical experts, and reflects their consensus view. The development process itself generated media
and public interest that helped raise awareness among practitioners and the public alike of the forthcoming
change in practice.
The guidelines include both general principles and specific recommendations. General principles include the
NBHW’s professional view of sick leave and the need for practitioners to use sick-leave certificates carefully as
another tool for care and treatment. The specific recommendations include information on treatment, prognoses
and recovery time for common medical conditions, as well as recommendations for the duration of sick-leave that
is likely to produce a good outcome. The guidelines also contain information about what practitioners can do in
atypical cases that may warrant additional sick leave or other expert input.
26 .
The NBHW is responsible for the registration and oversight of medical and selected other health
professionals in Sweden.
To prevent inappropriate circumvention of this new system of sick-leave guidelines by a worker
who tries to obtain additional sick-leave certificates from one or more GPs (i.e. “doctor shopping”),
the SIA can detect if corresponding certificates were from different providers and inform the last
practitioner, and request reconsideration.
B.
Building rehabilitation capacity using a public-private approach
To assist the large number of people with sickness or disability-related problems back into work,
the government is seeking:
•
To grow a market of private providers of vocational and placement services;
•
To concentrate the resources and significant skills of the PES on helping clients who are
further from the labour market to return to work;
•
To grow the medical rehabilitation service capacity administered by county authorities.
Collectively, these actions seek to create a public-private mix of services to reduce the numbers
of persons with work capacity being excluded from the labour market.
Reorienting the PES to help those furthest away from work to return
The broad overall task of the PES has always been to facilitate functioning of the labour market
by matching jobseekers to employers who want to recruit staff. Up until 2006, the PES used traditional
ALMPs to occupy many of those unemployed. However, partly in response to poor outcome
evaluation results of ALMPs (e.g. Adda et al., 2007), the new government shifted focus and spending
into measures to stimulate labour demand and reduce unemployment or underemployment. As a result,
a large number of ALMPs provided by the PES have been discontinued including bonus jobs,
educational leave replacement positions, jobs for recent graduates and general and enhanced
recruitment incentives. As well as directing the PES to cut back on ALMPs, the government has asked
it to focus on clients furthest from the labour market, including those who are only able to work a few
hours. Programmes were to a great extent, although not exclusively, offered to jobseekers who take
part in the job guarantees; those participants have been unemployed for at least a year (or at least three
months, if under age 25).
The government has recently started to introduce privately owned rehabilitation services as an
alternative to public employment services. The PES has received extra funding to purchase vocational
rehabilitation services from private providers for around 1,500 sickness beneficiaries in a pilot project
that will run over two years. Along the lines of the Australian model, it is expected that private
providers will be funded in three steps for the unemployed or underemployed clients they provide
vocational rehabilitation services to and then place in work. They will receive an initial payment at the
beginning of the programme when they accept a new client, a second payment after placement in work
and a final payment after employment has been sustained for a significant period indicating good
attachment to the labour market. A criticism of similar outsourcing in Australia has been the finding
that private providers “cream profit” by accepting easy-to-place clients and “park” the less work ready.
An interesting feature of the Swedish public-private approach is that the PES is not being downsized
as was the case with its Australian counterpart.
Partnering with counties to strengthen OHS and medical rehabilitation capacity
Until 1993, occupational health services (OHS) were funded and administered through a
collective agreement between the unions and employers’ confederations until the latter terminated the
arrangement. The government of the time also subsequently abolished its subsidy for OHS. Since then
it has been up to individual employers to fund the purchase of OHS services they deemed appropriate
under open market conditions. Particularly among smaller businesses which constitute the bulk of
private employers, this has meant that OHS is underfunded. To address this, around 1.6 billion SEK
has been provisioned in the government’s budget to develop the capacity of occupational health
services. Discussions between federal and county authorities and OHS providers are presently
underway to establish a new system under which the government would contribute this additional
funding. The details on the respective responsibilities of the counties and the OHS providers are being
negotiated.
Another important role of county authorities in Sweden is the administration of its health and
medical services. The government is looking to enhance capacity for medical rehabilitation by
increasing resources to county councils over the period 2008-2010. Around 1.8 billion SEK have been
budgeted for counties to provide evidence based medical rehabilitation. The county councils can either
provide the rehabilitation through the health services they directly administer or by purchasing
services from private providers. It is envisaged that the purchasing of services will stimulate the
growth of a private provider market so that over time, counties will have sufficient service capacity to
draw upon to offer a medical rehabilitation guarantee.
C.
Restructuring the SIA
The SIA administers social insurance benefits including sickness and disability, work-injury and
the old-age pension. Prior to 2005, the SIA operated 21 regional offices making somewhat
autonomous decisions about client assessment and benefit entitlement. This resulted in large variation
across regions (see Chapter 1). Lack of uniformity in the application of regulations was believed to
have been a factor in the rapid growth in the numbers of inactive people on sickness and disability
benefits. The main goal of restructuring the SIA was to strengthen central control in order to improve
consistency in the administration of social insurance at the front line and focus the agency on reducing
numbers of clients on long-term benefits. In order to participate in joint initiatives with other
organisations helping sickness beneficiaries such as the PES, the SIA needed its staff at all levels to
support centrally agreed directives and to work in a consistent way.
Centralisation and reorganisation of its functions allowed the SIA to make a number of changes
to operate more effectively, such as setting national targets for reducing the time for deciding whether
a benefit will be awarded. The ability to steer resources and plan across county borders has enhanced
the agency’s ability to decrease processing times for occupational injury cases. In the case of sickness
benefits, the SIA is setting up a new group able to make a quick assessment of benefit entitlement with
the aim of processing 90% of the cases within 30 days. Other new work processes have been
introduced to ensure more uniform service delivery.
As well as increasing uniformity of business processes, centralisation of control has allowed the
SIA to respond to the governments’ directive to have SIA frontline staff engaging with clients to
expedite their return to work, instead of processing benefit forms and medical certificates.
Applications for welfare assistance are being increasingly managed through the internet and processed
at the national centre – except where more support from employers or local GPs is needed, in which
case these are managed by a local branch and SIA officer.
Co-ordinating agency services to focus on client outcomes
A tangible outcome of the changes to the PES and the SIA is the joint agency cooperation in
helping long-term sickness beneficiaries back into work. Previously cooperation was hampered by
funding in silos, having different objectives in assessing work capacity and in the case of the SIA, the
considerable variability in frontline practice across regions. While the two agencies continue to differ
in focus when assessing work capacity, the institutional reforms in recent years together with an
innovative funding approach (Box 2.3) seem to have facilitated a remarkably effective model of
cooperation.
Each year the Director-Generals of the SIA and PES sign off on a joint agency plan to be
implemented by staff at various lower levels. Working together, frontline service delivery staff
members develop joint agency plans for each common client. There is a steering committee at the
central level between PES and SIA to make decisions in those cases where staff in local offices cannot
agree. However, use of this committee has been rare. Since 2003, around 50,000 clients have received
rehabilitation through the PES under this scheme.
This so-called FAROS model developed by the PES and SIA for those clients who used to fall in
between the responsibility of the two agencies, i.e. unemployed people on long-term sickness benefit,
has been in use since 2005. The approach starts with a meeting between the two agencies to develop a
plan for the person to return to work as soon as possible. Every individual case is discussed by a case
manager from the SIA and the PES, and clients receive more intensive follow-up from the PES as the
caseworker has only 35 clients instead of the usual allocation of 100 clients.
Box 2.3. Innovative funding to overcome administrative silos
The SIA has been allocated special funding that can only be spent in conjunction with the PES on sickness
beneficiaries who require vocational rehabilitation to help them find work. Moreover, the agencies are required to
jointly plan at all levels as well as report twice yearly on what they have been doing together and on how many
clients they have jointly helped into work. It seems this approach has been effective in stimulating sustained
interagency cooperation and focus on common clients. This represents a significant development in addressing
the problem of funding in silos that has compromised the achievement of client-centred outcomes in many OECD
countries.
Though it would be administratively simpler for the SIA to hand over clients to the PES and for the latter to
be directly allocated the funding for vocational rehabilitation, doing so would remove the need for staff from each
agency to regularly spend time together, including with the client, to plan an approach and agree on how
resources will be used. This purely administrative mechanism has provided a space for SIA and PES staff to build
positive and trusting working relationships that seem to lie at the heart of the observed cooperation.
2.3.
Comparing the reform intensity
The current Swedish government’s reforms built on those of earlier administrations to address the
high numbers of sickness and disability benefit recipients, and the low employment rate of people with
chronic health conditions or disability. How do these compare, overall, to changes in other OECD
countries, both in the more recent past and in a longer-term perspective? This can be understood in
terms of the policy typology developed in OECD (2003) and updated in the course of the ongoing
thematic review (OECD, 2006, 2007, 2008).27
According to this policy typology, compared with the OECD average, Sweden has a relatively
more developed activation policy, as indicated by above-average reintegration scores. At the same
time, however, Sweden also (and still today) has above-average compensation scores, reflecting a
more generous and more easily accessible sickness and disability benefit system. As for a number of
other OECD countries, including for instance Finland and Norway, the latter may well be an obstacle
to better outcomes from the more developed reintegration policy.28
Figure 2.1 shows policy trends in Sweden as compared to those countries reviewed by the OECD
in the past three years, both before and after 2000. Almost without exception, across the OECD
integration policies have been strengthened (i.e. integration policy scores have increased) and benefit
generosity cut (i.e. compensation policy scores have fallen). As regards Sweden, two conclusions can
be drawn: First, change has been very significant on both dimensions, but this is also the case in many
other countries. Some countries, the Netherlands, Australia and the United Kingdom in this sample,
have seen even more comprehensive reforms.29 Secondly, the reform intensity in Sweden has
increased considerably in the past eight years, especially on the side of the benefit system which
remained largely untouched by the reforms prior to the turn of the century. Potentially, this could lead
to better outcomes in the form of higher labour market integration and lower benefit dependence of the
population in question in the medium term.
27 .
To obtain a reasonable overview of what is happening in policy both over time and across countries,
in OECD (2003) a policy index was developed which consists of two dimensions, the generosity and
accessibility of benefits (the “compensation policy” dimension) and the generosity and accessibility of
employment policies (the “integration policy” dimension). The index of compensation takes into
account ten policy parameters: i) coverage of the benefit system; ii) the minimum disability level;
iii) the disability level needed to get a full disability benefit; iv) the maximum benefit level at average
earnings; v) the permanence of benefits; vi) the medical assessment; vii) the vocational assessment;
viii) the sickness benefit level; ix) the sickness benefit duration; and x) the unemployment benefit level
and duration in comparison with disability benefit. Also for the index of integration, ten policy
parameters are taken into account: i) access to different programmes; ii) the consistency of the
assessment structure; iii) employer responsibility; iv) supported employment programmes;
v) subsidised employment programmes; vi) the sheltered employment sector; vii) vocational
rehabilitation programmes; viii) the timing of rehabilitation; ix) benefit suspension regulations; and
x) work incentives. Each country is ranked on a scale of zero to five on each of these twenty
categories based on the Secretariat’s judgement. No attempt is made to assess which of these
categories is most important; all have equal weight. [Details of the points attached to each aspect of
policy and the policy stance of 20 OECD countries in 1985 and 2000 can be found in OECD (2003,
2006, 2007 and 2008).]
28 .
This conclusion holds for all years of analysis, i.e. 1985, 2000 and 2007/2008: while integration
scores have been rising and compensation scores falling in the past twenty years, Sweden had scores
significantly above the OECD average in all years. For instance, today’s compensation score for
Sweden is 31 points on the 50-point compensation scale, compared with an OECD average of 27
points. On the integration scale Sweden has 34 out of 50 points, compared with 29 for the OECD
average.
29 .
The four Scandinavian countries all fall in the same group of countries with “medium” reform
intensity: integration scores have increased by around 12-14 points and compensation scores fallen by
some 6-7 points (though less than this in Finland) between 1985 and 2007.
Figure 2.1. Swedish reforms in an international perspective: Not top but very close to
Changes in compensation and integration policy scores 1985-2000 and after 2000a,b
25
Integration policy change 1985-2000
Compensation policy change 1985-2000
Integration policy change 2000-2007
Compensation policy change 2000-2007
20
15
10
5
0
-5
-10
-15
a)
Countries are ranked by the decreasing sum of absolute changes in both dimensions taken together from 1985 to
2007/08.
b) The scale gives the change in policy on a 50-point indicator developed by OECD, see footnote 27.
Source: Secretariat estimates based on information from national authorities as well as OECD (2006, 2007 and 2008),
Sickness, Disability and Work: Breaking the Barriers (Vol. 1-3), Paris.
CHAPTER 3. MAKING THE REFORMS WORK – 35
CHAPTER 3: MAKING THE REFORMS WORK
The breadth of institutional and sickness and disability policy change in Sweden has been
considerable and impressive. Success of the latest reforms, however, will hinge on the actual
implementation of the new system and the effectiveness of its various incentives. Given the pace of
reform, the fact that the new approach may appear to be a harsh and radical departure from the past for
some, and that reform is being implemented during a period of rising unemployment and falling labour
demand, its success is not assured. There exist a number of areas where further action to support the
ongoing reforms seems warranted. In particular, it appears that responsibilities and financial incentives
for key actors are not sufficient to ensure that the new rehabilitation chain will work as intended.
Without some of the changes and adjustments recommended herein, there is a risk that the new system
could yet again turn into a new form of benefit chain, with many people leaving work never to return.
3.1.
Ensure widespread acceptance of and support for reform
In broad terms, the political economy of reform is about the socio-political processes that have to
be considered alongside economic and social factors in making major policy and institutional change
in a successful manner. The process of reform has been quite different in the past two years compared
with earlier efforts which involved more extensive and time-consuming consultation with social
partners and other stakeholders. While this has enabled the government to move faster, it also carries
the risk of losing the support of key players – support that is needed to achieve the intended economic
and social outcomes.
A.
Involving all stakeholders
Changes to sickness policy in Sweden in the past two years have been very fast. Contrary to
reforms of the unemployment system, which were already presented during the 2006 election
campaign, the key pillars of sickness benefit reform were only developed after the new government
took office. The speediness of reform, however, limited the level of consultation with key
stakeholders. The social partners were only given a few weeks to respond. While the political cost of
this remains to be seen, more engagement may needed to convince all stakeholders of the need for
further change in the current direction, in particular the need to reconsider access to historically
generous long-term sickness benefits.
The successful comprehensive reform of the Swedish old-age pension system during the 1990s,
which culminated in the introduction of a benchmark-setting notional defined-contribution benefit
system in 1999, offers a number of lessons which could also be useful for the ongoing change of the
sickness and disability benefit scheme. Successful reform requires first a strong proposal for change,
then winning support of key stakeholders and, finally, implementing change as negotiated. Much of
this was achieved during the 1990s through the work of a broad parliamentary commission on pension
reform.
Setting-up a similar high-level parliamentary commission to achieve a broad consensus on
unemployment, sickness and disability benefit matters, is currently under discussion. The work of
various ongoing commissions or committees can be seen as preparatory work for this purpose. This is,
36 – CHAPTER 3. MAKING THE REFORMS WORK
in particular, true for the Work Capacity Commission, the mission of which is to assess the concept of
work capacity in order to prepare a broadly accepted definition to be used to assess entitlements to
various kinds of supports. The aim is to improve coherence between the law and what people and
politicians expect from it, to clarify what can reasonably be expected from people, and to avoid the use
of contradictory definitions by different authorities.
Recommendations:
•
B.
Establish a high-level parliamentary commission on working-age benefit reform as quickly
as possible and involve all key stakeholders in its operation, including NGOs, social partners
and the main public authorities.
Supporting change in industrial relations
The social partners have traditionally been central players in social and labour market policy in
Sweden. It will be important to involve them in the policy process and convince them of the need for
change as they have an array of tools and instruments that are important for the success of sickness
activation policy. These tools can be used to support or complement reform, or to nullify it, wholly or
partly. The topping-up of public benefits in collective agreements or through bilateral agreements
between unions and insurance companies is an example of the latter: changes (typically reductions) in
benefit levels with the aim to improve work incentives have often been annulled by corresponding
increases in agreed benefit top-ups. This is not in the best interest of the system as a whole.
However, social partners can play an active role in supporting job retention and reintegration of
workers with ill-health or disability. This could include through initiatives to facilitate labour market
mobility and flexibility. Some initiatives to this end are ongoing; for instance, recent bargaining
includes efforts to introduce employer-paid rehabilitation in exchange for looser employment
protection. The government should make every effort to support the use of industrial relations in
moving from passive sickness benefit payment to active job retention.
Recommendations:
3.2.
•
For social partners to consider introducing more flexibility in wage setting in collective
agreements so to allow payment of reduced hourly wages in cases where a workers’
productivity fluctuates or reduces due to a disability. Currently, the only possibility is to
work part-time at full capacity, which is not possible for persons with some forms of
disability.
•
The new option of taking leave of absence from a current job during a sickness phase to try
another job, or employer, while maintaining the work contract with the previous employer,
should be more actively promoted in order to increase job mobility at an early stage.
•
Employees should be reminded at an early stage of sickness absence to seek the support of
their trade union during the rehabilitation process.
Strengthen responsibilities and incentives of key players
The recent suite of policy reforms address fundamental problems and appear promising.
However, closer scrutiny reveals gaps that could compromise the effectiveness of these reforms.
CHAPTER 3.. MAKING THE REFORMS WORK – 37
Various actors have been assigned new roles in the new rehabilitation chain, but not enough has been
done to ensure these roles will be fulfilled as intended.
A.
Employer responsibilities and incentives
Financial incentives for Swedish employers to adapt work and workplaces to retain people with
partially-reduced work capacity have always seemed comparatively weak, despite a strong legal
framework, in the form of a comprehensive Working Environment Act. At two weeks, the period of
employer-provided sick-pay is short by international comparison (and even this period is sometimes
covered by private reinsurance contracts). Financial incentives for employers have been weakened
further by the abolition of the only recently introduced 15% co-payment for sickness benefits, and
their responsibility for assisting in the development of a rehabilitation plan was removed altogether.
This is unfortunate in view of the positive results in some other countries, such as the Netherlands,
which has shown that such policies can effectively facilitate good employment practices.
The recent reforms affecting entitlement to sickness benefits do not include robust standards and
criteria for determining whether an employer has made bona fide attempts to adjust the workplace to
retain a sick worker in their job or to place them in another job as required under the new rules.
Though the financial penalty for failing to do so is high in principle (up to 32 months of salary), it
would appear less so in practice if employees and employers come to see that it cannot be imposed
because the propriety of employers in this regard cannot be reliably assessed. This presents an
opportunity for less scrupulous employers to circumvent employment protection legislation, knowing
that genuinely sick workers will find the emotional and financial strain of pursuing a legal case
prohibitive, and without agreed operational criteria the WEA30 and trade unions are likely to have
difficulty making the legal case necessary to have sanctions imposed. With potentially thousands of
workers each year in such a situation, a large administrative and financial burden could fall on trade
unions to represent them in litigation. Moreover, there is a sizeable risk that if such impropriety on the
part of even a small number of employers captures the attention of the media and public, the broader
reform agenda could be jeopardised. Agreed operational criteria would also provide employers with
clarity regarding what is reasonably required of them and when they can say they have addressed their
obligations in good faith.
Recommendations:
•
Consider re-introducing sickness benefit co-payments by employers. Alternatively, lengthen
the period of employer-provided sick-pay to make sure that good absence management and
monitoring31 pays off. Reinsurance of these costs should only be possible with premiums that
take the sickness cases created by the company into account (“experience-rating”).
•
Premiums to the workers’ compensation scheme, which covers work injuries, work accidents
and occupational diseases, should be both risk-rated (by sector) and experience-rated (by
individual employer). The current uniform premiums imply an unfair cross-subsidy from
careful to careless employers and from low-risk to high-risk sectors of the economy.
30.
The WEA only seeks to impose sanctions on employers who can be shown to repeatedly fail in
fulfilling their responsibilities under the Work Environment Act.
31.
Sickness monitoring and absence management can significantly reduce inappropriate sick leave use.
B.
•
Employers (and also employees) should have the option of accessing the rehabilitation
expertise and resources of public agencies32 when undertaking workplace adjustments that
help workers affected by sickness remain attached to their employer.
•
The WEA, working with the SIA, employer and trade union representatives, should lead the
development of agreed operational criteria for assessing whether an employer has made
genuine bona fide attempts to fulfil their obligation to adjust the workplace to retain a sick
worker or to place a sick worker in another job.
Facilitating labour demand
It is reasonable to surmise that the activation policies of the reformed system will facilitate a
surge in the supply of labour, particularly former sickness beneficiaries from January 2009. However,
policies to facilitate demand for them or other persons with partial work capacity are not strong. This
imbalance in the supply and demand orientation of recent reform is of particular concern because of
the recent economic downturn which will increase the general labour supply. Securing employment
for people with reduced work capacity is going to become even more difficult as competition for jobs
increases.
Insufficient policy attention is being paid to address the perceived and actual challenges faced by
employers in taking on a worker with reduced or temporarily affected work capacity. Action in this
regard is a necessary step toward ensuring there is adequate growth in appropriate employment
opportunities for the increasing numbers of these persons seeking work. Many employers perceive
there to be greater risk in taking on former or current sickness or disability beneficiaries as they are
often seen to be potentially less productive than other workers. Given Sweden’s strong employment
protection, it is likely that some employers will fear being stuck with a worker who both costs more to
manage and produces less.
While under the current policy, temporary wage subsidies are available to be used by the PES as
an inducement to employers to accept such workers, much more education of employers is needed to
broaden the pool willing to take on these persons, particularly as the global economic downturn will
mean there are more competitors for every job. Education and in-work support are also needed to help
fellow employees accept a new work-mate who is less productive or who has special needs.
It is critically important that the recent crisis in the global economy does not scare governments
into (re)opening the gates into inactivity. Lessons from the past clearly show that doing so – be it
through introducing early retirement pathways or more lenient entry into disability benefit schemes –
is very costly in the medium and long run. These approaches result in large numbers of otherwise
productive people becoming permanently lost to the economy; previous experience shows they do not
return to the labour market when the economy improves. Moreover, reversing such policies is very
difficult and costly in political terms. As such, efforts in the present to activate and/or retrain persons
with health problems who lose their job in the current crisis are both necessary and important to ensure
that they keep at least a partial foothold in the labour force. When the economy picks up again, it will
be possible to return them to fuller employment. By comparison, those parked in disability schemes
will, with few exceptions, be impossible to activate.
32.
The PES, the SIA and the WEA all have expertise in areas of rehabilitation assessment, planning and
management, though with largely different resources and staff capacity.
Recommendations:
•
Provide education and incentives to facilitate the expansion or creation of “employer circles”
that employers can use to help place workers who are no longer suited to their particular
business. Drawing from the experiences of similar employer networks in the Netherlands,
these circles should be organised on a regional rather than sectoral level to stimulate crosssector mobility.
•
Extend the exemption from employer-provided sick-pay to hiring of people who were sick
for at least one year (currently this is only available for hiring of disability beneficiaries). As
with the reduction in social-security premiums, the duration of this exemption could vary
with the duration of sickness-related inactivity of the hired worker.
C.
Compliance with sick-leave guidelines
GPs who authorise sickness certificates are important actors in the success of the innovative
system of sick-leave guidelines, both in reducing inappropriate sick-leave usage and helping to lower
moral hazard in this regard. More precisely, it is important that GPs create the right expectations (in
terms of the expected duration of sickness absence) at a very early stage. However, early indications
suggest that many GPs are not complying with the new guidelines and this is delaying the pace of
reform. Non-compliance is a significant issue, particularly as there are no direct incentives to induce or
compel GPs to support the new work-oriented approach.
While the NBHW appears to be operating on an assumption that the SIA will blacklist GPs who
consistently fail to comply with the new guidelines, the SIA has not taken a firm stance seemingly out
of concern that doing so could undermine the partnership approach it wants to build with the medical
community – particularly as the SIA has no internal capacity to perform medical assessments. The
lack of sanctions may slow the pace of implementation if the medical community develops a view that
they are not obliged to cooperate with the new arrangements governing sick leave.
Recommendations:
•
Sickness certificates exceeding seven days duration should be sent to the Social Insurance
Agency immediately, by either the sick worker’s GP or the employer, to undertake random
checks of the compliance with the new medical guidelines.
•
The SIA should cease to accept non-compliant sickness certificates. For clients in dire
financial circumstances, a discretionary emergency benefit may be required to sustain them
during such a delay period.
•
The SIA should be obligated to report repeated non-compliance of GPs to the NBHW for
investigation and sanction. The NBHW should make compliance with the sick-leave
guidelines a condition for renewal of registration of GPs.
•
Outcome data need to be collected to continuously improve and refine the guidelines. A
more evidence-based set of guidelines would provide better health and employment
outcomes and be used with greater fidelity by sceptical GPs.
D.
Incentives for county authorities
County authorities are important players in Swedish sickness and disability policy, because they
are in charge of the health care system. In this function, they employ the vast majority of GPs and are
responsible for medical rehabilitation. Regional governments are very autonomous in Sweden, being
elected by the public and collecting income tax directly for their own budget. Influencing them will
not be easy but it is necessary. In addition to providing clearer responsibilities and incentives for GPs,
it may be prudent to consider better incentives for county authorities as well.
Through their responsibilities, counties have a key role in the new rehabilitation chain. Delays to
signing agreements with county authorities to provide pre-employment services to support the new
system mean that urgently needed services are not adequately developed. In particular, this is true for
the new OHS system, which was meant to be put in place in concert with the new process at the
workplace. A key role of this service would be to monitor health and safety in the workplace and to
help employers manage sickness absence. This delay could have significant consequences for the
implementation of the reformed sickness benefit system.
Recommendations:
•
Introduce the OHS system as swiftly as possible by signing agreements with counties and
OHS providers, and consider mandatory OHS coverage for all workplaces. OHS services
should have a strong focus on early sickness absence identification and intervention.
•
Medical rehabilitation agreements with the counties should be signed quickly and the idea of
a medical rehabilitation guarantee pursued. A similar national health care guarantee commits
counties to offering treatment within 90 days of a treatment decision.
•
Consider introducing sickness benefit co-payment by county councils to raise the incentive
for county authorities to reduce sick leave in their region. Reduced sickness absence levels
would then automatically translate into savings for the county. Financial incentives could
also reward county-level compliance with the sick-leave guidelines.
•
The recently developed Danish benchmarking tool Jobsindsats.dk, a continuously updated
internet portal which allows local, regional and national authorities to compare practices on a
local level on a wide range of indicators, could be taken as a good practice and adapted to the
specific circumstances and needs of Swedish counties.
Healthy work environments
Much of the recent reforms rest on a premise that sickness is a temporary condition caused either
by discrete in-work accidents or lifestyle factors outside of the workplace, and that ongoing
participation in work does not ordinarily make people unwell, but instead produces good financial and
other outcomes. There is an expectation that altering the incentives and supports to return to and stay
in work will address the problem of large numbers on welfare.
However, empirical research in Sweden also indicates that some workplaces manage staff in
ways that cause them to become unwell, and that recent changes in the formal employer-worker
relationship, employment agreements, outsourcing and pressure to perform in the workplace since the
early 1990’s are related to health conditions underpinning sick-leave use33. Incentives, education and
support to make sure workplaces management practices are healthy would seem warranted, but this
seems conspicuously absent from the policy agenda.
Recommendations:
E.
•
As part of the new OHS system being negotiated by the government and key stakeholders,
emphasis should be placed on educating employers about the productivity benefits associated
with healthy work environments. Incentives to offset the cost of promoting workplace
practices that are conducive to good physical and mental health could be provided.
•
OHS providers should undertake annual employee surveys of healthy workplace
management and other practices, which would allow the government authority managing
OHS to publish the performance of each business and in each county.
Making work pay
To encourage people to stay in work, the government has recently introduced an additional tax
credit of SEK 1,000 per month (which roughly corresponds to EUR 100) for those who remain in paid
work. The labour supply effect of this reform was shown to be significant, at least for certain groups of
the population (e.g. single mothers) but the impact on people with health problems is unknown.
A general problem for the Swedish social protection system is that it is predicated on the basis of
public benefit entitlement where most people receive generous collectively-agreed top-ups. Coverage
of the latter is not universal but, due to the high degree of unionisation, the large majority of
beneficiaries have very high replacement income. Previous efforts in Sweden to adjust wage
replacement rates to increase the incentive to remain in work have generally been countered by
corresponding adjustments to the benefits negotiated under collective agreements. Policy is needed to
constrain these practices or to develop alternative strategies that ensure the financial incentive to be in
work is meaningful, and that being sick is not seen as more advantageous than unemployment.
Though not ostensibly a part of the sickness benefit reforms, the government has cut subsidies to
unemployment funds and raised the flat-rate contribution from workers by 40%. This change has had a
sizeable impact, resulting in an almost doubling of the number of uninsured persons. One result of the
latter is that through this change the number of people not entitled to unemployment benefit upon
expiration of their sickness benefit entitlement after six months, or possibly one year, will be larger. If
antipathy towards the government occurs because a large number of people end up without work as
the global economy slows, while not being entitled to social security payments, the broader reforms
could be jeopardised.
33 .
Theorell (2004) reviews Swedish literature showing that since the 1990’s workplaces have
experienced increased work pressure, reduced decision latitude and diminishing social support and
that these changes have resulted in increased risk of coronary heart disease, myocardial infarction,
psychological stress, musculoskeletal and gastro-intestinal disorders. Similar associations were found
by Westerberg (1997), Vingard et al. (2000), Westerlund et al. (2004) and Magnusson-Hanson (2008).
Oxenstierna et al. (2004, 2005) show that reductions in social support influenced by management
decisions are associated with long term sick-leave utilisation.
Recommendations:
3.3.
•
Explore alternate incentives to reward people for staying in work that cannot readily be
negated by the compensation available through collectively-negotiated private sick-leave
insurance.
•
Make sure the impact of falling unemployment insurance coverage on the new sick leave
system is fully understood. Despite the recent change, unemployment benefit continues to be
massively tax-financed so that exclusion from the system seems unjustified.
Facilitate policy implementation by continuing institutional change
The recent suite of policy reforms is promising, particularly in light of the corresponding
structural reforms to the SIA and the PES. However, ultimate success will depend considerably on
how well the government continues to manage the implementation of the new approach in a number of
key areas.
A.
Improving institutional cooperation
Due to institutional reforms in recent years the SIA and the PES are better organised to deliver
services in a consistent manner across the country, and in a joined-up way thanks to the innovative
funding approach that underpins their cooperation. Staff members across agencies have good ongoing
relations together with better knowledge about the functioning and advantages of the other agency,
particularly in relation to helping sickness beneficiaries return to work. The new policy framework
requires this good cooperation and continuous information exchange to continue, particularly as they
require work-capacity assessments for very different purposes: the SIA assessment is largely medical
and to determine benefit entitlement; the PES assessment is instead focused on vocational ability and
potential. It is encouraging to see that while the two agencies continue to operate different capacity
assessments they have built a functional and productive means of collaborating for some of their
common clients.
While the PES has personnel with considerable expertise in rehabilitation, the SIA is responsible
for engaging with the employer and sick worker during the early months of benefit receipt. The SIA
does not involve the PES until the worker has been on a sickness benefit for six months – by which
time their work-readiness has deteriorated considerably34. The process for managing sickness benefit
by the SIA and of collaboration between the SIA and the PES prioritises the assessment of eligibility
for benefits well in advance of that for rehabilitation. The focus should clearly be the other way round,
if the goal is to prevent sickness benefit recipients from inadvertently establishing themselves on a
track of inactivity.
The SIA lacks internal capacity to assess the work capacity of clients and has to rely on external
medical practitioners. If it is not able to procure appropriate screening at the established intervals to
determine whether the person has some capacity in order to bring the PES into the process, the time
this external assessment takes will undermine the effectiveness of the new rehabilitation chain
concept. While the PES has specialists available at each local office to help a worker or employer to
34.
After three months of sickness, an individual can establish contact with the PES so that after six
months if they are no longer entitled to sickness benefit the process has already started. However,
there is no obligation to do so; it is up to the individual to ask for help.
assess work capacity or adjust a work situation to keep a person in work, they are not able to assist
until called in by the worker or the SIA35.
Recommendations:
B.
•
The SIA should consider seeking second medical opinions more frequently to check the
validity of sickness certificates provided by GPs; many OECD countries, including France,
are doing this on a random basis with quite some success.
•
To improve the efficiency of the rehabilitation chain, a good triage system is needed at an
early stage to ensure a swift and early transfer of clients, e.g. from the SIA to the PES and on
to a rehabilitation specialist.
•
Better incentives (including sanctions) are needed to make sure that the contact meetings
taking place from day 90 of sickness benefit receipt are scheduled promptly. These meetings
should also involve the employer, who is ultimately responsible for the sick worker.
•
After the 180th day of sickness benefit receipt when entitlement ends, hand-over meetings
should be organised whenever necessary which involve the worker, the SIA and the PES but
also, possibly, the employer, the doctor and the trade union.
•
More generally, the very successful FAROS model of SIA-PES co-operation for clients who
are long-term sick should be gradually adopted for all clients who have received sickness
benefit for at least 180 days (or even earlier in some cases, if resources permit).
Modernising service provision
Outsourcing of vocational rehabilitation and placement services is not a new practice and the
Swedish approach seems to have avoided some of the problems observed with this type of approach in
other countries. However, there remain significant threats to its success, which if left unattended could
easily mean poor outcomes particularly for those furthest from the labour market.
An important lesson from Australia and elsewhere in the OECD is that the compliance burden
associated with publicly-funded service contracts can cripple many smaller private sector providers,
particularly rural-based and non-profit organisations. Over time, these withdraw from the market
leaving a smaller number of large private-sector providers to dominate. Driven by commercial
priorities, they tend to actively target easier-to-place clients in urban centres where there are more job
opportunities as this requires the least-skilled front-line staff, comparably simple organisational
management and is therefore most profitable. Clients who live in rural or remote areas or who are
more difficult to place for other reasons are often avoided for these same reasons. Even where bounty
incentives have been offered to attract private providers to work with more challenging clients, this
has not comprehensively resolved the issue. Mainly because complex clients have heterogeneous
service needs and helping them requires a provider to recruit and retain a broader range of highlyskilled personnel in multiple disciplines, as well as investing considerably more management time and
cost in delivering services to rural and remote areas. Commercial success is in large part about
35.
The WEA is a comparably smaller agency whose role is to monitor workplace occupational health and
safety and compliance with corresponding legislation. It does not have the capacity or capability to
give advice to and support employers in keeping workers affected by sickness in work in the early
phase of benefit receipt, when the chances of successful rehabilitation are highest.
maximising profit and minimising cost and management complexity. It is harder to run a sustainable
commercial enterprise placing complex clients.
Recommendations:
3.4.
•
The outcome-based compensation paid to private vocational rehabilitation and placement
providers should be structured in a way that encourages them to accept and be rewarded for
success in placing less work-ready clients with more complex needs.
•
Private vocational rehabilitation and placement providers working with clients in rural and
remote areas should receive additional compensation to ensure there is adequate service
coverage outside of major metropolitan centres.
Conclusion
Sweden is currently undertaking extensive reforms that represent a radical departure from
previous policies that are aimed at cutting its large pool of sickness and disability beneficiaries.
Notwithstanding the pace of reform, the country has succeeded in introducing some important changes
including transforming major public agencies and therefore has a good chance of success.
The challenges in front of Sweden appear fourfold: Firstly, as one would expect, around
implementation of the new system; secondly, around continuing policy development as gaps –
especially insufficient incentives for the main actors – become obvious; and thirdly, around winning
the hearts and minds of a nation that has traditionally shown high moral hazard toward the take-up of
sickness benefits by those who have some work capacity. The recent turn in the broader world
economy is also expected to place additional pressure on the reforms.
Panicked by rising unemployment in the past, led some OECD nations to lose focus on the
importance of keeping those affected by sickness or diminished work capacity attached to the labour
market – or worse still, to allow them easy entry into disability schemes. The price of this short-term
thinking has however been shown to be enormously costly: both in terms of their labour becoming
permanently lost to the economy and the enormous permanent welfare burden that has had to be
carried into the future without any sign or hope for respite.
Given its historically high numbers of sickness and disability beneficiaries, the important reforms
which Sweden has been implementing to maximise the productive contribution of such persons needs
to continue – and continue to be a point of focus in its overall labour policy, even though attention
may eventually be needed to stimulate employment among the general working-age population in
response to the recent economic crises. Success in this regard will play a significant part in
determining whether Sweden is more strongly positioned with a lower welfare burden and capable
labour supply once economic conditions improve.
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LIST OF ACRONYMS - 49
LIST OF ACRONYMS
EU-SILC
European Survey of Income and Living Conditions
GP
General Practitioners
NBHU
National Board of Health and Welfare
OHS
Occupational Health Services
PES
Public Employment Service
SIA
Social Insurance Agency
WEA
Working Environment Authority
Sickness, Disability and Work:
SWEDEN: WILL THE RECENT REFORMS MAKE IT?
How is it possible for average health status to improve while many workers continue to leave the labour
market permanently due to health problems, forced to rely on welfare to survive? At the same time, many
working-age adults with reduced work capacity are denied the opportunity to work. This social and
economic tragedy is common to virtually all OECD countries, including Sweden. It is a paradox that
warrants explaining as well as innovative action.
This single-country report in the OECD series Sickness, Disability and Work explores some of the reasons
behind this phenomena in Sweden and the potential of its innovative recent and ongoing reforms, for
example with regard to sickness absence and benefit policy, to lower inactivity and increase participation.
The report includes a range of recommendations to address evident and foreseeable gaps, with
consideration to broader impacts from the global financial crises on the Swedish economy.
Since 2006 when Sweden had the highest level of dependence on sickness and disability benefits in the
OECD (14% of the working age population), significant reforms have taken place to address structural
issues dating back to the mid-1990s when a shift from unemployment benefits occurred. The hitherto
time-unlimited sickness benefit was capped to six months and those no longer eligible becoming expected
to seek to continue work in an amended or different job, including in one with a different employer if
necessary. This reform is particularly significant because it aims to address one of the key problems
affecting many other countries: people holding on to the wrong jobs for too long.
This report concludes that further change is needed to ensure that the reforms live up to their promise.
Responsibilities and financial incentives for some of the key actors, particularly employers and the health
care system, and co-operation among some institutional actors, all have to be strengthened.
In the same series
Vol. 1: Norway, Poland and Switzerland (2006)
Vol. 2: Australia, Luxembourg, Spain and the United Kingdom (2007)
Vol. 3: Denmark, Finland, Ireland and the Netherlands (2008)
www.oecd.org/els/disability
1

30% of the working-age population was unemployed

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